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Responses of the Polish economy to demand and supply shocks under alternative fiscal policy rules

Author

Listed:
  • Zachłod-Jelec, Magdalena

    (Ministry of Finance in Poland)

  • Karp, Piotr

    (University of Lodz and Ministry of Finance)

Abstract

Recent experiences of many countries during the crisis restored the important dilemma that fiscal policymakers face of how to alleviate the demand contraction while ensuring sustainability of public finances in the long-term. In this paper we study the consequences of the demand and supply shocks for Poland under alternative policy scenarios. Using a macroeconometric model of the Polish economy, we analyse the response of the economy to shocks under several fiscal policy rules. We try to answer the questions which fiscal rule works best in terms of public finance sustainability and business cycle fluctuations stabilization while taking into account the source of shocks to the economy. We found that structural balance rule and expenditure rule act counter-cyclically in the whole simulation period, but at the same time the pace at which they stabilize public debt is quite slow.

Suggested Citation

  • Zachłod-Jelec, Magdalena & Karp, Piotr, 2010. "Responses of the Polish economy to demand and supply shocks under alternative fiscal policy rules," MF Working Papers 5, Ministry of Finance in Poland, revised 31 Jul 2010.
    • Handle: RePEc:ris:mfplwp:0005
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    File URL: https://www.gov.pl/documents/1079560/1080340/MF_WP_No_4-2010.pdf/2a21b488-fec5-ddb8-0453-386a1ee6d7f1
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    References listed on IDEAS

    as
    1. Dudek, Sławomir & Pachucki, Dawid & Zachłod-Jelec, Magdalena & Zając, Tomasz & Kolski, Paweł & Fudała-Poradzińska, Iwona & Danielski, Kamil, 2012. "eMPF Econometric Model of Public Finance," MF Working Papers 14, Ministry of Finance in Poland, revised 12 Jun 2012.
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    More about this item

    Keywords

    fiscal rules; model simulations; demand shocks; supply shocks;
    All these keywords.

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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